Translated from GegenStandpunkt 3-16

Promised 15 years ago, now demanded by China, doubted by the West

Is China a market economy?

Now that it’s been a member of the WTO for 15 years, China is resolutely pushing for the contractually due correction of its status quo as a “non-market economy” at the beginning of next year and insisting, with reference to the accession documents, that it be automatically awarded market economy status at the turn of the year. The construct of a “non-market economy” which is allowed to compete in a market economy seems strange at first glance. The “leading media on European politics” explains it this way:

“When China joined the WTO in 2001, it was considered a centrally planned economy; the accession conditions required that the country be categorized as a ‘non-market economy’ for 15 years. In a nutshell, prices and costs were kept artificially low and were not the result of normal market forces, but of government subsidies favoring domestic industry.” (EurActiv.com, 5/12/16)

The retrospective talk of a “centrally planned economy” does not become any truer in 2016 either. After all, the negotiations, which were widely reported at the time as being incredibly “hard” and “tough,” were ultimately due to the fact that a power that had long been integrated into capitalist global trade with its export successes – which it had achieved through a combination of capital imports, the obligation of foreign capitalists to joint ventures with domestic companies, the guarantee of unbeatably cheap, ruthlessly exploited labor power, and attractive tax and profit transfer rules in its “special economic zones” – had presented a very familiar calculation to the architects and guardians of free world trade. By rising to the rank of a full-fledged WTO member, the leadership in Beijing not only wanted to expand its successful use of the world market and make the domestic economy an ever-growing source of wealth, but also to promote the Chinese state to the rank of a determining authority over the conditions of global capitalistic commerce. All of this with the explicitly formulated political claim that, as a world trading power, it will use the world’s monetary wealth that it increasingly has at its disposal as a permanently resilient source of its rise to a strategic power that enjoys worldwide respect.

Such claims are only all too familiar to the leaders of the Western capital locations and protagonists of “globalization.” After all, the entire endless canon of rules and agreements of border-transcending capitalist competition owes its existence to their interest in a world trade system in which they enrich themselves as one-sidedly and permanently as possible by accessing sources of wealth under foreign control. And they exemplarily demonstrate the equation that their role as guardians of world trade, with their world economic and financial power based on it, is also the basis of their political status as judge over the rights and duties of the world of states: In the competition between sovereign powers, increasing the wealth of the nation is and remains the unbeatable basis for expanding the means of military power which is needed to give one’s own interests the character of universally recognized rights. From this point of view, they were determined to “open up” this “gigantic market” to their entrepreneurs from all industries and to occupy it with their capital power as a business sphere, and consigned the question of China’s membership in the club of free trading powers on to the dispute, led mainly by the USA, over the appropriate conditions, reservations, and restrictions under which Beijing was allowed to join.

The special status of a “non-market economy” was the entry condition for China’s membership in the honorable circle of WTO members. The pipe dream of a “price formation” that is unobjectionable in free market terms gave the West the authority to put on trial the prices with which China is outcompeting its international competitors and to combat them as state dumping based on the criterion of the “normal” world market price of comparable third countries. In this way, the leading powers incorporated a general proviso into the set of rules that is still valid today and can be updated at any time, giving them a whole toolbox of trade policy countermeasures to combat unwanted Chinese competitive successes. In return, China imposed various “transitional periods” in the opening of the various subdivisions of its markets and, in particular, the provisional protection of its agriculture from comparison with the superior Western agricultural capital – and, with reservations, the freedoms of cross-border buying and selling that apply to all members of this club.

After 15 years, a failed Doha Round, and a world financial, sovereign debt, and general economic crisis that is now entering in its ninth year, China has made a lot out of the encouragement of international capital with the active help of willing capitalist investors from every corner of the earth, especially from the financially powerful centers of the free Western world. It has, as everyone demanded, “opened up,” allowed the free movement of capital throughout the country, subjected its society solely to the yardstick of profitability, and thereby made the Chinese national economy the solid basis of a superior world trading nation that no longer wants to accept the old WTO restrictions and no longer needs a large part of the special concessions granted for this purpose. In the words of one expert:

“China has caught up in value chains, is very close in many areas to what German companies can produce, and competition is simply growing here.” (Mikko Huotari, Institute for China Research, tagesschau.de, 6.13)

Nevertheless, not only the USA insists on this, but the German Chancellor is also publicly raising concerns “that China’s economy is still very heavily subject to state directives” and challenging the agreed upon upgrade to a proper market economy. What is remarkable about this is not so much the subtle distinction between “state directives” and the democratically and legally flawless promotion of renewable energies, the forward-looking Industry 4.0, or the electric car, as the standpoint that the German Chancellor asserts in matters of honest “market forces” against state distortions of a flawless competition: Wherever Chinese capitalists outcompete our large corporations and medium-sized global market leaders, they inevitably attract the suspicion that their successes can’t have come about in a “fair” way. Ultimately, they must be the result of state manipulation, otherwise the customary right of German, European, and American companies to win in the global competition for growth would ultimately have been in effect. It is left to the journalistic elite to provide the plain language – if China were granted the status of a market economy, “it would be protected from anti-dumping suits and high punitive tariffs” (tagesschau.de, 6.13) and the protective powers of free capitalist competition would no longer have a way to correct undesirable competitive results.

The proviso on decision-making that the leaders of the Western capital strongholds reserve for themselves in matters of future conditions on Chinese participation in world trade is taking on additional importance because of the world economic situation they are grappling with. They absolutely want to preserve the right to discriminate against the capitalist upstart in terms of trade policy, which they exercise by defining Chinese steel as “overcapacity” and their defeats at the hands of China’s entrepreneurship as Chinese “dumping,” as an instrument of their crisis competition. Under the conditions of global over-accumulation, all participants are no longer competing for their respective share of global capital growth, but rather fighting over the distribution of the damages they are threatened with due to the absence of growth; and in doing so, the Western leading powers in world business are determined to shift a fair share of the crisis burden on China. They refuse to let China prove itself according to the incorruptible yardstick of capital productivity, not because only this criterion and nothing else would be valid in their competition and China alone violates it, but because exactly this criterion currently means the devaluation of a huge pile of capital, which is also impending for Europe and the USA. They certainly do not want to cash in on this result of their competition in the crisis, but rather are doing everything they can to impose it on their competitors, in this case China – and to this end they resort to roughly the same methods of political influence on the course of business that they accuse China of, flagrantly violating the principles of a free market economy.